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India Crude:MCX, NYMEX up over 1% on bargain buying post 6% fall Thu

Friday, May 24

 

By Roshni Devi

 

MUMBAI – Crude oil contracts on the Multi Commodity Exchange of India and the New York Mercantile Exchange rebounded and rose more than 1% today due to bargain buying after prices fell more than 6% on Thursday, analysts said.

 

The rupee's strength against the dollar limited the rise in domestic prices of the fuel. A firm rupee makes the import of dollar-denominated commodities like crude cheaper.

 

At 1644 IST, the June crude oil contract was up 1.2% at 4,084 rupees a bbl and the July delivery crude oil contract on NYMEX was up 1.1% at $58.56 a bbl. On Thursday, the MCX contract fell more than 6% to a nine-week low of 4,008 rupees a bbl and the NYMEX contract fell nearly 7% to a 10-week low of $57.33 a bbl.

 

Worries that worsening trade relations between the US and China might drag down global economic growth, affected prices of the fuel.

 

US Treasury Secretary Steven Mnuchin told CNBC on Wednesday that a trip to Beijing to resume trade negotiations had not been scheduled yet. Media reports said recent restrictions imposed by the US on Chinese telecom giant Huawei have led Beijing to rethink its economic relationship with the US.

 

On Thursday, the US rolled out a $16-bln aid package for US farmers hit by the tariff war with China. That served as a reminder to the financial markets that the US-China trade deal is in trouble, and rekindled fresh fears over eurozone economic growth, Vandana Hari, an independent energy analyst and founder of Vanda Insights, said in a report.

 

Beijing said that the US needs to "correct its wrong actions" if it wants to continue negotiations and is currently showing little interest in resuming talks. "With this kind of stance, we expect each side to steadily elevate the pressure on the other and markets will just have to keep up," Edward Meir, an independent commodity consultant, said in a report on INTL FCStone.

 

On Thursday, the International Monetary Fund said escalation in trade tensions between the US and China had the potential to disrupt global supply chains and jeopardise the projected recovery in growth in 2019.

 

The US' flash purchasing managers' index dropped to 50.6 in May from 52.6 in April and the composite PMI fell to 50.9 from 53.0. 

 

"(The data) show that the trade conflict is having a visible slowing effect on the economy and that even the US economy is not immune to the higher punitive tariffs. This led to a noticeable increase in risk aversion on the financial markets…(and) stocks and crude oil came under pressure accordingly," a report by Commerzbank AG said.

 

OUTLOOK

"Escalating trade tension between US and China coupled with surging inventories might continue to weigh on crude," a report by Angel Commodities said.

 

For the rest of the session, the MCX contract is seen at 3,960-4,210 rupees a bbl, and the NYMEX contract in a $58.10-$59.15 range.  End

 

US$1 = 69.52 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Shirsha Thakur

 

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This copy was first published on the Cogencis WorkStation

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